The Defense Information Systems Agency is considering canceling its planned $450 million commercial cloud contract, following lower than expected demand for those services.

“Initial indications are the demand will not require a contract with the ceiling estimated in this draft solicitation,” according to a Nov. 8 notice on fbo.gov. “We are currently revising our acquisition strategy for satisfying requirements for hosting public non-sensitive data in commercial cloud environments,” DISA said in the notice.

DISA went on to say that its strategy “may result in a solicitation for a new contract at a significantly lowered ceiling,” or the use of existing contracts capable of meeting user demands.

DISA is, however, moving forward with a separate $427 million cloud contract for storage services in its internal hosting facilities, or Defense Enterprise Computing Centers (DECCs).

“The ESS II (Enterprise Storage Service) contract effort is continuing as planned and there is no consideration to cancel this effort,” said DISA spokeswoman Cindy Your. “Based on feedback to the draft RFP, the Commercial Cloud Services Provider acquisition strategy is being reviewed.”

At an industry event in July, a DISA official said the agency expected up to 10 awards under the $450 million contract for commercial services. A final request for proposal was supposed to be released in August.

Meanwhile, some DoD components have already struck deals with commercial vendors to host public data in the cloud. For example, several websites under the secretary of the Navy are now being hosted in the cloud.

Public websites for the Department of the Navy chief information officer, and the assistant secretary of the Navy for Energy, Installations and Environment, are among those being hosted by Amazon Web Services. "The initiative standardizes technology used for public website development while reducing costs to the government," according to an announcement on the CIO website.

The 2012 Defense Authorization Act required DoD to develop a strategy to move its data and services from department-owned and -operated data centers to cloud computing solutions. Cloud solutions “provide a better capability at a lower cost with the same or greater degree of security” and are generally available in the private sector, the law says.

This has prompted DISA to expand cloud offerings beyond its current private clouds, where services are provided exclusively to DoD and hosted in DISA data centers. But some vendors question whether cloud services provided though DISA will be cheaper than customers dealing directly with cloud service providers. DISA customers would be charged a 2 percent fee for using the contract, in addition to the cost of the service.